from the forward-thinking dept

The following is a guest post from Martin Thornkvist, who both runs a Swedish indie record label, and works for Media Evolution -- an organization designed to help its various members learn about and embrace new media innovation opportunities. This is cross-posted from his blog at Media Evolution, and raises a really good point. Too often people talk about technology and content as if the two are at war with each other, rather than recognizing how it's a complementary relationship.

The first quarter 2011 Apple made a profit of $26.74 billion $6 billion. An impressive 17% of that is from their latest product, the iPad. Having followed Apple's reports for some years it struck me just how unimportant content distribution is for them. In economic terms at least.

It's obvious that Apple, and other tech companies, are using content to sell hardware. And damn, they are good at making us buy new products each and every year.

Hook and bait

It's obvious that the main objective of dealing with content for Apple, and tech companies in general, is to boost hardware sales. These days you can't hear a mobile executive talk without mentioning the importance of building an ecosystem for content to sell handsets.

The fisherman needs both a hook and bait to catch a fish. The fish is too smart to go for a hook without bait, like customers with tech products. And the bait without a hook is a fiesta for the fish rather than the fisherman, kind of like being a fish in a bay of pirates.

When looking at the media landscape we can see that everybody wants to be the hook. The hooks are owning the customer and the ecosystem in which they interact. That means they can control price, pace of releases and the right to set the rules of the game.

The media industries were used to being the hooks. That changed many years ago. Now, it's just about creating those alternative hooks of income streams yourself.

To many the question of being a hook or a bait is emotional. Everybody sees their work as the center of the media landscape and wants the rest to obey to their wills.

Stop making life hard for each other

Even though content distribution represents a small percentage of Apple's overall profit, they are making life hard for content producers by changing the rules of the game. Most recently they announced that for publishing companies to sell their subscriptions inside applications, they will take a 30% cut. It's still uncertain whether that counts for music apps like Spotify as well.

The content side is making it equally hard for tech companies that want to develop new media platforms. Music labels, film studios and book publishers can arguably be said to make it a nightmare to license their products. This is instead of acknowledging developers and engineers to be their best buddies to create new ways of providing content to customers, and eventually help them make money they badly need.

Interdependent relationship

We need to understand that technology is nothing without content and content would be nothing without technology. Technology and content for sure has an interdependent relationship.

For a long time the content producers had the upper hand. Right now the technology providers act like they have it. But in the long run they both need to cooperate to keep prospering.

from the not-quite-getting-it-yet dept

There's something rather ironic that the US government's document on how to get various US government agencies to prevent future leaks (a la Wikileaks) was quickly leaked to the press. But, it's not really that surprising, is it?

Of course, the main thrust of the document isn't to question whether or not so much secrecy is really necessary, but to send out a memo to various government agencies suggesting they use psychiatrists and sociologists to sniff out workers who might be disgruntled (full memo embedded below). Among a variety of (pretty unsurprising) suggestions for keeping confidential information confidential, the checklist of things that organizations are supposed to do includes:

Do you use psychiatrist and sociologist to measure:

Relative happiness as a means to gauge trustworthiness?

Despondence and grumpiness as a means to gauge waning trustworthiness?

I didn't realize that you needed to use such professional help to figure out if you had a disgruntled worker on your hands. Isn't it the role of managers themselves to have a sense as to whether or not their employees are disgruntled? Though, I'm somewhat amused by the idea that the US government thinks that a psychiatrist or sociologist can accurately pick out who's likely to leak documents.

Not that it's a bad thing to try to figure out if there are disgruntled workers or to make sure secure systems really are secure. I'm all for that. I just think it's a bit naive to think any of this will actually prevent future leaks. You just need one person to get the info out, and there's always someone and always a way to do so -- as demonstrated by the fact that this document itself "leaked" so quickly. It seems a better situation would be to focus on making sure that any damage from such leaks is minimal.

from the you-can-compete dept

All too often, we hear people complain that it's "impossible" to compete in some manner. "You can't compete with free." "Big companies will steal your ideas and you can't compete with big companies." And yet, time and time again, we've seen that this isn't actually true. Every company has its weaknesses, and there are always ways to compete. This doesn't mean, of course, that every competitor will succeed. It doesn't mean that competition is easy. But there are always ways to compete, no matter how many advantages you believe another player has.

We've talked in the past, for example, how Google's closed nature could be its Achilles heel. But another area in which Google has a clear weakness, as we've documented over and over and over and over again, is that it's horrible at customer service. From the outside, to the average user, Google often appears as a big white monolith, with little hope of getting a human response to issues. This is not universally true, of course. I've seen many Google employees personally reach out and respond to problems, but it often feels sort of ad hoc, and the number of stories of problems falling through the cracks is certainly noticeable.

So it doesn't surprise me that others are beginning to recognize this as well. JJ sent over a blog post by Jesse Noller, picking up on this point and suggesting that the way to compete with Google is by being more human, friendly and personable. That is, building up brand loyalty by actually being nice, rather than technically efficient but cold (as Google often appears). It's a good read for anyone in a space where they may end up competing with Google (actually, it's a good read for anyone who thinks that there's any company that is competition proof). Here's just a snippet, but I recommend reading the whole thing:

You can only do these things -- building a brand -- and building a "cult" by doing the things Google -- given its robotic failings -- cannot do. Love your users, infect them with your passion -- not just your technical prowess or ability to scale or release new web codecs, or give them the right search results, or giving away source -- infect them with your passion for what you do. Support them, respond to them -- even if you're giving it away for free -- after all, nothing is free.

Passion, compassion -- connecting with other humans, people are always looking for a place that accepts them and makes them feel welcome. They want to get real support instead of emails that get sent to unknown voids and are never answered. Making things warm, inviting both in language and in the feel.

Of course, there was a time that Google created such passion, but mainly from the quality of its products, not from its human touch. But that's the point. Every company has its weaknesses, and no company is competition proof.

from the how-about-acting-smarter? dept

With the Las Vegas Review Journal continuing to massively abuse copyright law with its Righthaven lawsuits, the absolute best source for covering the story has been the competing Las Vegas Sun -- leading some to claim that its coverage was to spite its local competitor. However, the Sun put together a good editorial explaining why the story is so newsworthy. Now, Sherman Frederick, the publisher of the LVRJ has hit back with an editorial slamming the Sun and insisting that the Righthaven strategy is the right one.

I'd link to the story, but since the LVRJ has made it clear it doesn't like links, I figured it's best not to do so.

Also, I would normally quote Frederick's article to debunk it -- a clear case of fair use -- but since the LVRJ has made it clear it doesn't want anyone quoting its articles (despite the fact it still has 19 separate "share" buttons on each article), I won't bother. Instead, I'll just make some general statements about Frederick's column.

First, Frederick suggests that there are only two options for dealing with people copying your words online: you sue or you go out of business. He predicts that the competing paper, The Sun, is going to go out of business because it's not suing others. I will note, of course, that he doesn't point out the slight conflict of interest in the fact that he helped fund Righthaven, and thus has incentives to try to get other newspapers to make the same mistake he's making. But, of course, there are plenty of other options, such as putting in place a smarter business model. The idea that the cat blogger in Boston is taking any revenue away from the LVRJ is beyond laughable. No one reads the story on the cat blog post and says "gee, now I don't have to go to the LVRJ ever again."

Frederick also claims that getting others to link to you and to promote your site doesn't help you at all (which is partly why we're not). However, this suggests he's unfamiliar with the concept of "Google," and the fact that it ranks your site's relevance, in part, to how many others link to you and who those others are. But, his bigger problem is that he thinks people are saying that if you let others link to you the money will just roll in. But no one's saying that. They're saying that links in combination with a smarter business model help raise your profile and create lots of opportunities to make more money. Unfortunately, it looks like Frederick is taking the lazy short cut, which is pissing off all sorts of people, and serious hurting his brand.

While he claims that since the lawsuits began they haven't seen any loss of traffic to their website, that's a meaningless stat at this point. First off, it's still quite early. Second, the idea isn't just that the lawsuits directly would lead to a loss of traffic, but the inevitable chain of events following such lawsuits. It's as if Frederick can only think a single step ahead. He must be a hell of a chess player.

From there, he claims that even if he was losing revenue from these lawsuits it would be worth it, because protecting the writing is more important than revenue. Really. That's a paraphrase rather than an exact quote, because I don't want Righthaven to sue me, but it's basically what he says. The reason for that? He insists that it's the writing in the newspaper that is the key value. That's only partially true of course and sort of besides the point. These sites that he's suing are not competing with the LVRJ, so pretending that a random site posting a single story somewhere (with credit and a link back) is somehow damaging the LVRJ is simply wrong.

But, more importantly, he's overvaluing the content and undervaluing the community. He's never been in the business of selling content. He's always been in the business of selling the attention of his readers to advertisers. Forgetting that would be a big mistake. He claims that it's the quality and (artificial) scarcity of the content that drives readership, and that's partially true, but it only goes part of the way to explaining the business. It suggests that he's done little, if anything, to make that content more valuable and useful for that community. In fact, he's doing the opposite, by suing those who try to do something with the content. In the long run, that seems quite likely to backfire.

from the nice-work! dept

A year and a half ago we questioned whether or not Hulu could really survive, given the rock and a hard place situation it had put itself in by being owned by the content rights holders, who wanted to limit what Hulu could do in competing against the rest of the online world. This limitation by its owners was quite obvious in the recently released subscription package that felt wanting.

Now, Hulu's CEO, Jason Kilar -- who, it should be noted, has always appeared to fight for consumer interests against the demands of Hulu's owners -- has come out and said, quite clearly, that Hulu is not trying to "kill" cable. In other words, he's signaling to the world quite blatantly: Hulu is unable to do the one thing it needs to do to be a successful business.

If Hulu were a truly independent business, the main focus of that business would be to flat-out disrupt the monopoly cable TV business. That's a huge opportunity. But, of course, Hulu's owners don't want that, because they're in this neat symbiotic relationship with the cable companies, where those cable companies keep paying more and more money to the TV companies just to carry their shows. So they don't want to upset that business model -- even if it's incredibly anti-consumer. So, because of that, Hulu can't do the one thing it needs to do. It's telling, by the way, that the only people in our comments, who thought that Hulu's subscription offering was a good deal, were those who had or were planning to ditch cable. And here comes Hulu admitting that it's not designed to help those people. Yikes.

from the you-can't-be-serious dept

A few years back, it seemed like Warner Music actually had a better handle on where the music industry was heading than its 3 major label rivals. In the last two years, however, it seems like WMG has consistently gone further and further in the opposite direction. It may have hit a new low today with the announcement that it will pull out of all free streaming music licensing offers. Yes, Warner Music just told the one thing that was effectively competing with unauthorized downloads to shove off. Brilliant.

"Free streaming services are clearly not net positive for the industry and as far as Warner Music is concerned will not be licensed.

"The 'get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price' strategy is not the kind of approach to business that we will be supporting in the future."

And thus, WMG will go out of business that much more quickly. That is the model that the market is moving to, and Bronfman and WMG appear to have decided to ignore what the market wants, to cover their eyes, stick fingers in their ears and go down with a ship that could easily be righted. Incredible.

Now, Warner may be a bit gun-shy after its investment in iMeem (a free online music streaming service) became a total disaster, but what Warner doesn't seem to realize is that a big part of why it failed was the ridiculous demands Warner put on iMeem in terms of how much it demanded in payment per stream. The problem is that WMG has totally unrealistic expectations of how much money should be paid per stream, and that's because the company's top execs still don't seem to handle basic economic modeling particularly well. And thus, the company will fail.

You don't compete with "free" by taking your ball and going home. You don't compete with "free" by pretending that old artificial scarcities are coming back after the wall has been broken down. You don't compete with "free" by suing customers. You don't compete with "free" by shunning those who have business models that work. You compete with free by offering a better product and a better business model. WMG is choosing to go in the other direction. Best of luck to them...

from the someone-want-to-give-them-a-recap-how-that-worked-for-the-RIAA dept

There's something that just drives some executives nuts about the idea that someone might access their content "without paying" directly for it. We saw this last year when music industry execs kept saying they had to stop going to war against consumers, but immediately followed that up by saying that none of that mattered if they couldn't stomp out "piracy." It's as if the second any sort of unauthorized use occurs, the entire "cost-benefit" analysis goes out the window. If it's costing you more to try to stop unauthorized access, and it's not working, and there are ways to embrace it that makes you more money, the solution should be simple: you stop worrying and start embracing.

Apparently that message hasn't gotten through to the folks who own Ultimate Fighting Championship (UFC). Perhaps it's not too surprising that such a group's only reaction is to fight, but when they even admit that fighting unauthorized access will cost more than any "losses," you have to wonder how any executive at the company keeps his job. That's a recipe for getting fired: "Hey, I'm going to undertake an action that will cost us more than not taking this action -- oh, and it's likely to piss off a bunch of our biggest fans as well."

This isn't a huge shock. Last month, a UFC exec was at that Judiciary Committee hearing about unauthorized access to live streaming sporting events, and played the role of the RIAA/MPAA lobbyists claiming "them stealers are destroying our business." Given that, it's no surprise that UFC is gearing up to go after both sites like Justin.tv and the individuals themselves. Apparently, UFC's fight-first, think-later execs haven't noticed how badly similar plans have backfired. Most of the streaming websites have pretty strong DMCA safe harbor protections, and suing users hasn't worked out particularly well for the RIAA. Furthermore, pissing off your fans? Yeah, not such a hot move.

Meanwhile, the Torrentfreak article above does a really nice job breaking down just how many people willingly pay huge sums to watch UFC events on Pay-Per-View, and how that number keeps on growing. There was apparently a dip in a recent fight, but TF notes that it probably had more to do with one of the headlining fighters having to back out. What does become clear is that UFC has no problem convincing huge numbers of people to pay up huge amounts to watch its events. Pissing off a lot of fans with ridiculous lawsuits doesn't make anyone more likely to buy.

Hell, even Joe Rogan, the comedian (and notorious hater of "joke stealers") who also acts as commentator for UFC seems to think this is a bad idea, saying: "I think that kind of stifles innovation. It stifles the direction the internet is going. I like things being out there. I think people are always going to buy UFC pay-per-views. You're going to get a much better experience watching it on your television than all stretched out looking fuzzy and pixilated. They're trying to protect their money, but the internet is a strange animal."

from the perhaps-it-was-inevitable dept

There's a fascinating, and well sourced, editorial over at Hypebot by Kyle Bylin, suggesting why the major record labels have had so much trouble adapting to these changing times. Bylin argues, convincingly, that a big part of the problem was that as the record labels got bigger and bigger, they focused solely on the "music as commerce" side of things, ignoring the role of "music as culture." Obviously, music as commerce is an important part of the music business, but if you ignore the cultural importance of music (except, of course, when lobbying the government for more protections) you miss what's actually happening in the marketplace: how people are connecting with the music, and what they're doing (and want to do) with the music. Here's a snippet:

As the record industry moved through this stage there was a decline in learning orientation -- in learning what fans actually wanted -- both in terms of how they consumed music and what they were willing to pay for. So to, they began to discount the role that luck played in their success, to assume that the mass-marketing successes that occurred near the end the CD boom, which sold 3-4 million copies, applied to the natural laws of the universe, rather than that of a relatively short-lived phenomenon. This addiction to blockbuster artists is what characterizes the second stage of decline, which Collin's deemed The Undisciplined Pursuit of More. Here, the record industry started out on an unsustainable quest, and, because of their huge successes, they were pressured to grow.

Having reached the peak of the CD boom in 1999, the record industry had become a nearly $15-billion-a-year juggernaut, but under the pressure for more growth they collapsed, and, in the process, a vicious cycle of expectations had been set that strained the artists, the fans, the culture, and their systems to the point of breaking. Since record industry was unable to deliver new music with "consistent tactical excellence," they began to fray at the edges. Disruptive technologies were released, an epidemic of file-sharing proceeded, and, at this critical juncture, vested interests of music executives struggled and competed to achieve repetitive consumption through obsolescence. But these executives were too late, as the record industry, by externalizing the blame for their decline in sales, had already started to show symptoms of stage three, Denial of Risk and Peril.

Music executives began discounting negative data, amplifying positive data, and putting a positive spin on ambiguous data. In stage three, Collin's argues that those in power start to blame external factors for setbacks -- "or otherwise explain away the data" -- rather than accepting responsibility and confronting "the frightening reality that their enterprise may be in serious trouble." Right away, the Internet and file-sharing became easy scapegoats for the decline in sales that the record industry faced.

There's nothing all that surprising in the essay, but it's nicely written and explained. Well worth reading the whole thing.

from the slow-down dept

There have been rumors for years that Google might someday release its own operating system, but the announcement that it's turning the Chrome browser into an operating system is an odd duck for a variety of reasons (amusingly, the "Google browser" was also rumored for years before Chrome showed up). Why is it odd?

Google already has an operating system in Android. While that was initially focused on mobile devices, it's already being expanded to netbooks, so turning that into a more complete operating system seems like the way to go.

Chrome itself still needs a ton of work. I've tried using it, and it's crazy buggy and so unstable -- I simply gave up and went back to Firefox. Jumping from just browser functionality to a full on OS before the browser code is really stable seems like a big leap.

The idea of turning a browser into an operating system has been around since the days of Netscape (folks there used to talk about how it was making Windows obsolete), but reality has proven otherwise. In fact, it was partly Netscape's desire to take down Windows by making Netscape more OS-like that caused Netscape to get so bloated as to be nearly useless.

Why now? Why an OS? Part of the appeal of the growth of the web itself (and Google with it) is the fact that it's made the whole operating system less and less integral to the computing experience. With the move towards more of a "cloud" based world (which Google has been a big part of driving) there just isn't as much value in the operating system as much as in the past. So why jump on that bandwagon now?

Given all of the above, it just seems like a confused strategy. There will likely be conflicts between Android and Chrome and consumer confusion as well, not to mention worries from folks who just want Chrome to be a simple, competent browser.

Perhaps Google can route around all of these issues, but at a first pass... it just seems like a confusing direction for Google to go in.

from the couldn't-happen-to-a-nicer-bunch dept

I missed this one when it initially happened, but it looks like the MPAA is following in the footsteps of the RIAA -- who recently laid off a bunch of folks. Apparently the MPAA quickly followed suit and drastically scaled back after the studios cut the MPAA's funding by about 15 to 20%. Apparently some of the entertainment companies are finally realizing that the strategies employed by the RIAA and MPAA (lobbying for favorable laws and suing the crap out of anyone who dares to innovate) aren't actually helping them build a stronger business. Of course, it seems likely that they'll keep making the wrong moves, even at a reduced budget -- but maybe, just maybe, they'll finally start to realize that their recent strategy has been a colossal failure.